States should overhaul how they give colleges money, report says
Dive Brief:
- States with college completion goals should adopt funding practices that give higher education institutions enough money upfront to meet those targets, according to a new report from Complete College America, a nonprofit aiming to raise postsecondary attainment.
- The organization described this approach as “completion-goals funding,” which would tie state money to the “actual cost of educating enough students to reach statewide completion goals,” the report said.
- This model would break from outcomes-based funding, which boosts the amount of money colleges receive only after they meet certain goals, such as improving graduation rates. Outcomes-based funding creates “unfunded mandates” because colleges don’t receive the money needed to improve student outcomes upfront, according to the report.
Dive Insight:
Under completion-goals funding, colleges would regularly work with policymakers to evaluate and revise their plans for bettering student outcomes, the report said.
Institutions would use the money to implement practices for improving student success, Complete College America said. The report listed several strategy examples, such as offering stackable credentials and basic needs support.
The report described this approach as an evolution from outcomes-based funding — which is also known as performance-based funding. This model has become more prevalent over the past four decades. At least 31 states adopted this approach as of 2020, according to the State Higher Education Executive Officers Association.
The share of government funding that’s distributed based on performance measures varies widely among states.
In 2021, for instance, performance-based funding made up over 90% of the general operating budgets of Indiana public colleges, SHEEO found. But that same year, it made up less than 1% of the general operating budgets of Massachusetts colleges.
Research has been mixed about performance-based funding. In 2020, one peer-reviewed study found adoption of the model has sometimes been associated with positive impacts on graduation and retention. However, the same research found “compelling evidence” of unintended effects, such as these models disadvantaging underserved students and institutions that lack resources.
Charles Ansell, vice president of research, policy and advocacy at Complete College America, suggested that outcomes-based funding can preserve inequities between public colleges.
“If you are perpetuating an inequitable funding base to begin with, then what will happen is certain colleges that have more resources will be more adept at being able to meet the new student success targets that are being set forth, versus other colleges that may already be strapped for resources,” Ansell said.
Colleges with fewer resources may struggle not only to make gains but also to see the same improvements as other institutions in the state, he said.
Complete College America’s proposal, however, would flip this model.
“If the state has an attainment goal — or even the country — how do you work that backwards to figure out what it actually costs to meet that goal?” Ansell said.
